Banks fail to agree on how to refund fraud victims

Banks fail to agree on how to refund fraud victims

The UK’s banks and building societies have rejected a 2.9p transaction fee that would have been used to compensate victims

Stephen Little
Fri, 11/15/2019 – 10:35


The UK payments industry has failed to agree on how victims of bank transfer fraud should be refunded, according to the UK’s money transfer system operator.

Pay.UK, which operates the UK’s money transfer system, has concluded there is “no industry consensus” to finance a central fund to reimburse innocent victims of Authorised Push Payment (APP) fraud.

APP fraud is when the customer is tricked into authorising a payment to another account, often by a criminal posing as someone who has been employed by the victim, such as a builder or solicitor.

Last year, £354 million was lost due to APP scams, according to figures from UK Finance.

A new industry voluntary code offering consumers protection APP fraud was introduced on 28 May.

Customers of banks that have signed up to the code will be reimbursed for their losses provided they have taken reasonable care.

Banks that have signed up to the code include Barclays, HSBC, Lloyds Banking Group, Metro Bank, Nationwide, Royal Bank of Scotland, NatWest and Santander.

Seven banks and building societies put forward a proposal to introduce a rule requiring banks to pay into a shared central fund, which would be used to reimburse innocent victims of APP fraud in cases of “no-blame”. This charge would have been 2.9p and transferred on sums of money above £30.

But according to Pay.UK, a number of banks and building societies have rejected this proposal.

Concerns included the impact on investment fraud prevention and whether could be effectively implemented or enforced.

This means that from next year the decision to compensate APP fraud victims will rest with the banks and building societies.

Pay.UK is now calling on industry and regulators to work together to find a solution.

Paul Horlock, chief executive of Pay.UK, says it is “critical that the whole industry plays its part”.

Stephen Jones, chief executive of UK Finance, says: “Ensuring victims of APP scams receive compensation when their money is stolen by criminals is an absolute priority for the payments industry. There is strong agreement across the sector that we must all work together to create a central, long-term, sustainable funding

“The industry will continue to call for new legislation to make the code mandatory and agrees with the Treasury Committee and Which? that issues of liability and reimbursement should best be addressed by new laws rather than just a voluntary code alone.

“We urge any future government to work together with the Payment Systems Regulator to put new laws in place quickly that ensure victims are protected and reimbursed.”